25 Important Trial Balance Questions and Answers [With PDF]

The 9 th chapter of our accounting learning course is “Trial Balance”. In this article, we’ll learn the 25 most important Trial Balance questions and their answers.

It will help you understand the important Trial Balance terms and their explanations quickly.

By reading this post, you may quickly prepare for accounting courses and for any competitive tests such as school and college exams, vivas, job interviews, and so on.

So let’s get started…

Trial Balance Questions and Answers

The 25 important Trial Balance questions and answers are as follows:

Question 01: What is Trial Balance?

Answer: A trial balance is a list of debit and credit balances extracted from the ledger on a specific date, including the cash and bank columns of the Cash Book.

Question 02: What are the Objectives of Trial Balance?

• One of the primary goals of the trial balance is to ensure that the entries in the journal and ledger are correctly posted.
• To aid in the preparation of the Statements of Comprehensive Income and Financial Position.
• To ensure that both the debit and credit aspects of transactions, as per the double-entry system, have been properly recorded in the books of accounts.
• To identify and correct any errors that may exist in the activities of keeping a journal and a ledger.
• To gather all of the balances of accounts in one place in order to simplify the preparation of final accounts and thus reduce labor and time waste.
• The information can be conveyed to the financial statement via trial balance.

Question 03: What are the Features of a Trial Balance?

• A trial balance is neither an account nor a component of one. It is a statement of training all ledger account balances.
• It is not recorded in any accounting book. The trial balance is done on a separate sheet or piece of paper.
• A trial balance is created by combining the balance of accounts at the end of a specific accounting period.
• A trial balance is prepared before financial statements are prepared at the end of an accounting period.

Question 04: What are the Advantages or Benefits of a Trial Balance?

• It ensures mathematical accuracy.
• Ensures accurate recording
• Assists in quickly determining the current financial situation.
• Aids in the correction of accounting errors.
• It is simple to obtain an idea of the organization’s condition prior to preparing the final account of the organization from the Trial balance.
• Ensures proper use of the double-entry system.

Question 05: What are the Disadvantages or Limitations of Trial Balance?

Answer: The three important disadvantages or limitations of a trial balance are as follows:

• The trial balance is not included in the accounts.
• The trial balance does not detect all errors.
• A trial balance is not conclusive proof of account accuracy.

Question 06: What is the Procedure of Preparing Trial Balance?

• Transactions are initially recorded chronologically in the journal, and then transferred to different ledger accounts for permanent record keeping. All ledger accounts are balanced at the end of the accounting period.
• Transactions can also be posted directly in the ledger without first preparing the journal, and the ledger accounts are then balanced.
• Then, on a separate sheet of paper, all of the ledger’s debit balances are placed in the debit column, and all of the ledger’s credit balances are placed in the credit column; finally, the debit and credit columns of the list are separately totaled. This is referred to as the trial Balance list.
• When the totals of both columns equal one another, it is assumed that the stages of the accounting cycle are arithmetically correct.

Question 07: What are The Methods of Preparing Trial Balance?

• Total Trial Balance
• Balance Trial Balance
• Total Sum and Balance Trial Balance

Question 08: What Are the Different Trial Balance Columns?

Answer: The following is a brief explanation of the various columns of a trial balance:

1. Serial/Code No.: If there is a code no. of accounts that code no. is entered here; otherwise, the serial no. of ledger accounts is entered here. For example, 1, 2, 3, and so on.

2. Account Name/Details: This column contains the full name of ledger accounts whose serial numbers are written in the first column. Stationery, Sales, Purchase, Accounts payable, cash, and so on.

3. L.F. (Ledger Folio): The page/pages of the ledger that shows the balances of the relevant accounts are written in this column. Errors can be easily identified and corrected this way.

4. Debit Balance: The amounts of the ledger accounts’ debit balances are written in this column.

5. Credit Balance: The amounts of the ledger accounts’ credit balances are written in this column.

Question 09: Why Do Both Sides of Trial Balance Agree?

Answer: In a double-entry system, every transaction is recorded in a journal, debiting one account and crediting the other for the same amount of money, along with an explanation.

When a transaction is posted from journal to ledger, the debit account of the journal is debited in the same account and the credit account of the journal is credited in the same account in the ledger.

As a result, the total ledger account debit balance equals the total ledger account credit balance.

According to the double-entry principle, if all correctly drawn ledger account balances are properly recorded in trial balance in debit and credit money columns, the totals of both trial balance columns become equal.

Question 10: What kinds of Ledger Balances are recorded on the Trial Balance’s Debit Side?

Answer: The following ledger balances will be written on the trial balance’s debit side:

• All of the assets (Land, Machinery, Furniture, Building ,etc)
• All of the expenses (Purchase, Salary, Advertisement, Bad Debts, etc)
• Prepaid expenses (Advance Rent, Advance Wages, Prepaid Insurance, etc)
• Accrued incomes (Accrued Interest, Accrued Commission, etc.)
• Other items (Drawings, Sales Return, etc.)

Question 11: What Types of Ledger Balances are recorded on the Trial Balance’s Credit Side?

Answer: The following ledger balances will be written on the trial balance’s credit side:

• Total Liabilities (A/C Payables, Bills Payable, Loan, etc.)
• All types of income and profits ( Sales, Commission Received, Interset Received, etc.)
• Outstanding expenses and unearned incomes (Advance Fees Received, Advance Rent Received, etc)
• All types of reserves (General Reserve, Bad Debts Reserve, etc)
• Other Items (Purchase Return, Capital, etc)

Question 12: What Kinds of Errors Can Trial Balance Detect?

• Errors of Omission
• Errors of Commission
• Money Mistakes
• Error in Balancing Ledger Account
• Error in Transferring Ledger Balances to Trial Balance
• Error in Totaling Both Columns in the Trial Balance

Question 13: What are the Errors that the Trial Balance does not Detect?

Answer: The following errors are not detected by the trial balance:

#1. Clerical Errors:

• Errors of Omission
• Errors of Commission
• Errors of Miss-posting
• Compensating Errors

#2. Errors of Principle

Question 14: What are the Procedures for Correcting an Incorrect Trial Balance?

• In trial balance, double-check the totals of the two columns.
• Verify that all ledger account balances have been correctly entered into the trial balance.
• Verify that the debit and credit balances were correctly posted on the appropriate side of the trial balance.
• Verify that posting from journals to ledger accounts was completed correctly.
• Verify that the ledger accounts have been correctly totaled and balanced.
• Determine whether or not the cash columns and bank columns of the cash book have been properly balanced, and whether or not the balances have been correctly included in the trial balance.
• Determine whether the difference between the totals in the trial balance’s two columns is divisible by two (two). If this is the case, it should be noted whether there is a similar amount in the trial balance and whether the amount is placed in the correct place in the trial balance.

Regardless of the steps taken, if the mistakes or errors cannot be detected, the amount by which the trial balance disagreed should be placed in “Suspense Account” for the time being. Following that, when errors are detected, they will be corrected via suspense A/C, which will be closed once the errors have been corrected.

Question 15: What is Suspense Account?

Answer: When the totals on both sides of the trial balance do not agree, it is necessary to identify the errors.

However, in most cases, detecting and correcting errors takes a long time. As a result, it is not rational or feasible to postpone the work of preparing Final Accounts for such an extended period of time.

For the time being, the disagreement of both sides of the trial balance is made equal through Suspense Account.

It is not a long-term solution, but rather a temporary arrangement. If the total of the trial balance’s credit side becomes less than the total of the trial balance’s debit side, the suspense account will be shown on the credit side, and vice versa.

Question 16: How to Close Suspense Account?

Answer: If an error or errors are not discovered after a thorough examination of the book of accounts, we must prepare a rectification journal using related ledger balances; if all errors are discovered, the difference in the Trial Balance will be equal to the sum of the error or errors.

In that case, the balance of the suspense accounts will be zero, and the suspense accounts will be automatically closed.

If all errors are not found, the balance of the suspense account will be displayed, and it will be shown in the Final account.

Question 17: What are Errors of Omission?

Answer: If a transaction is not recorded at all, the amount of the transaction will not be recorded in the relevant ledger account, and/or if the transaction is not transferred from journal to ledger, both columns of the trial balance will be valued by an equal sum lower amount of money.

For example, goods sold to Green but not recorded in the sales book. Because an equal amount of debit and credit has been omitted from the record, the trial balance will agree.

Question 18: What are Errors of Commission?

Answer: If a transaction is recorded in the primary books of accounts by a lower or higher amount of money, that lower or higher amount will also be recorded in the ledger in question, and thus the trial balance will agree.

As an example, consider the $3000 in goods sold to Green. If it is recorded as $30000, both Sales A/C and Green A/C will be valued at $27000 more. In this case, too, the trial balance will agree.

Question 19: What are Errors of Miss-posting?

Answer: Such errors occur as a result of employees’ carelessness. Assume Green has given you $3000 in cash. The cash book is properly debited with $3000, but when posted to the ledger, the Yellow account is credited instead of the Green account.

The trial balance will agree because the total of credits has been the same, despite the fact that the amount has been credited to the incorrect account.

Question 20: What are Compensating Errors?

Answer: Compensating errors occur when one mistake is compensated for by another. For example, Green A/C is supposed to be debited with $2000 but has only been debited with $200. On another occasion, Yellow A/C was mistakenly credited with $200 rather than $2000.

Even if there are two errors, in this case, the total of both sides of the trial balance will agree. Because both sides will be reduced by the same amount, $1800.

Question 21: What are Errors of Principles?

Answer: Errors committed due to a lack of proper accounting knowledge and/or violations of recognized accounting principles are referred to as errors of principles. An example of such an error is when capital expenditure is recorded as revenue expenditure and vice versa.

Question 22: How to Record Closing Inventory in Trial Balance?

Answer: Closing inventories are usually not included in the trial balance. If the trial balance has an adjusted purchase and gross profit, the closing stock is included in the trial balance’s debit side.

However, In that case, the opening inventory is excluded from the trial balance.

Question 23: What is the Formula of Calculating the Adjusted Purchase?

Answer: The formula for calculating the adjusted purchase is as follows:

Adjusted purchase = opening stock + purchase + expenses related to purchase – closing stock

Question 24: What is the Format of Trial Balance?

Answer: The format or pre-form of the trial balance is as follows:

Name of The Organization

Trial Balance

Question 25: How to Prepare a Trial Balance from the following Problem?

From the following balance of “Z Traders”, Prepare Trial balance as of 31st December 2021

Answer: The solution to this problem is as follows:

Z Traders

Trial Balance

As of 31st December 2021

I hope that by the end of this post, you have a good understanding of the “Trial Balance” chapter.

You will gain a better understanding of the “Trial Balance” chapter if you read these 25 important trial balance questions and answers on a regular basis.

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